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Elasticity of Petrol

Elasticity of Petrol
The elasticity of supply and demand for oil has been a major problem to economic growth in the United States and the world at large. This article explains the economic forces of demand and supply have been playing out in the oils sector and its impacts in the United States economy. The author of the article tries to relate the price shocks in the international crude oil market and its effect on the economic situation of US. For the past five years, the United States economy has been having problems. The problem in the housing and finance sector in the year 2007 had devastating impacts on the US economy. The government of the US has been working on policies and measures of bringing back the economy to a positive performance. However, the author notes that the major hindrance to the recovery from recess and subsequent growth of the economy is the rising prices of petrol. From the year 2007, the price of crude oil has risen by over 50 percent. Fluctuation in the prices of petrol has become a common phenomenon (R.A, 2012).
Despite the rise in the cost of petrol, the economy of United States had a positive performance. However, in 2011, major oil shocks were again experienced due to the Libyan crisis which devastated the economy. Journalists are prospecting an increase in the price of oil this year as a result of the looming crisis in Iran which is a huge producer of oil. The author notes that the crisis in Iran is not immense yet the cost of petrol is already rising (R.A, 2012).
The author of this article notes that as the prices of petrol continue to skyrocket, consumers are seeking alternative methods of coping with the high prices. Petrol consumers are seeking of alternative ways of maintaining production while reducing the consumption of petrol. One of the alternatives is the use of natural gas. While petrol remains to be the most essential commodities in the US economy, the author sees alternative consumption as the best means of reducing the consumption of petrol (R.A, 2012).
The rising cost of petrol has been on the increase since the beginning of the 2000 decade. It is not worthwhile blaming the increased cost of petrol to the US economic downturn of 2007 – 2009. If there was any cost of rising petrol on the US economy, then they are very secondary and cannot be blamed for the US economic crisis.
Petrol is one of the most precious commodities in the economy. It is the main driver of the US economy. The economy has for a long time been trying to devise alternative sources of energy. Nonetheless, this has not at any point cut down the demand for oil in the economy. The question that needs to be posed here is whether the use of alternative sources of energy can help reduce the demand for petrol. As the principle of economics says, a high demand for a commodity will always result in higher prices for that commodity. This is what is playing out in the oil industry.
The trends in the cost of petrol are worrying. While the oil industry is being controlled by cartels, it is not worthwhile blaming the skyrocketing petrol prices to the problems facing the cartels. There are tendencies of unhealthy business practices taking place within the cartels which result in the rise in cost. It could simply be said that cartels are manipulating the prices for their benefits.

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